I’ve been a reader of International Living for a few years now (I only subscribed for one year, but since they have my credit card number, they keep on renewing without my permission), and IL is just one spoke in a real estate advertising and publishing empire that includes such affiliates as Pathfinder International and Real Estate Trend Alert. Many of the IL articles are written by or about ecstatically happy expatriates who escaped dreary lives in
Rochester, or Minneapolis (December 2012 issue) to find low-cost, gringo-loving paradises without mosquitoes, muggers or muddy roads. A typical testimonial might sound like this: "Every morning we eat fresh tropical fruits on our patio while Juan Valdez roasts our coffee. Unicorns come to us from out of the jungle -- and we can actually pet them!" West Virginia
Nothing bad ever happens in
Latin America in International Living. Crime? Never heard of it. Try reading expat forums to learn the downsides of living in Latin America.
A subscription to IL gets one signed up for complimentary Pathfinder Alerts, an on-line newsletter featuring foreign real estate deals. A recent e-mail from publisher Margaret Summerfield to a “select group of readers” presented a “For Your Eyes Only” audiovisual presentation from “an international businessman” with a “shockingly powerful wealth-building secret” which we, the "select readers" on their spam list, are urged to keep secret. "Secrets of the wealthy" is getting to be one of the most tired lines of the investment scam business, and this script has all the other standard vernacular of phony get-rich-quick schemes, including the requisite “what would you do with that kind of extra money!” and “You need to be serious about making money – fast!” -- except for the slight Irish accent.
The "international businessman" turns out to be Ronan McMahon, her business partner, promoting a premium IL product, Real Estate Trend Alert, featuring his alleged prowess in spotting amazing real estate deals and sharing “insider information” from his “millionaire friends”, a service normally priced at $999 per year, but temporarily reduced to $499 per year if one “acts now”. The price can even be broken down into quarterly payments of $124.75, and there is a 30-day money-back guarantee if not delighted with his service. I found myself intrigued when he said that his most recent finds are in
, a country where I also appraise real estate.. Costa Rica
This presentation has many of the typical features of the Sleazy Investment Promoter's Playbook, such as:
- Playing on our dreams. “What would you do with all that extra money?” is a standard investment promoter’s psychological ploy that takes the listener out of the realm of reason and prudence and into the realm of dreams.
- Exaggerated claims of investment expertise. Mr. McMahon’s own resume shows that he was not employed in the real estate industry prior to being hired as Pathfinder/International Living’s “real estate expert’. If he is indeed a successful real estate investor, he should give us evidence. As for RETA's claims of profits made my its members, they use the dishonest technique of calculating profit by taking the lowest original purchase price in the development and then comparing it to the highest current listing price in the development, misleading readers into thinking that Ronan McMahon provided 100+% profits for his readers. Aren't there any resales to calculate actual profit?
- Claims of “insider secrets” and “millionaire friends” and heavy use of investment promoter buzzwords, such as “confidential” and “insider”. This "fake exclusivity" is how many so-called real estate and advice gurus sell their expensive seminars and publications. Truly successful investors have no need to sell seminars and publications. Most of today’s real estate and investment gurus, even Rich Dad himself, make their money from marketing books and seminars and not from investment.
- Calling us “select”. This is also a "fake exclusivity" trick. Twenty years ago I often received mass-mailed letters addressed to “Select Area Single” from Great Expectations, an overpriced and scammy dating service. They didn’t even know my name or marital status. Likewise, the only thing International Living/Pathfinder knows about me is that I was a sucker who gave them my credit card number. For that I should be labeled "naïve" rather than "select", unless I've been selected for being stupid.
- Special discounts if you “act now”, thus engendering a sense of urgency.
Despite suspecting a hoax, it is to protect and inform all of you, my “select readers”, that I acted as a guinea pig in subscribing to his Real Estate Trend Alert service, authorizing a payment of $124.75 on my credit card and relying on a 30-day money-back guarantee. Little did I know that the scam had already begun.
Although I chose the $124.75 (3-month) option, their server automatically upgraded my request to the full $499 subscription. An hour later, my credit card company contacted me about this mysterious $499 charge. I contacted IL and asked for this charge to be corrected. Four days later I requested a full refund, but only received a credit for $124.75, leaving me with a balance of $374.25. I have since asked for and received a full refund on March 7, three weeks later, after several dealings with their flaky customer service department (with excuses such as "our computer is programmed to give only one refund, and we can't get it to refund the remainder"). Remember that Pathfinder is an Irish company and might not play by (or even know) the same rules as American companies.
Two days after ordering, I started receiving the daily Real Estate Trend Alerts, which turned out to be recycled (and free) Pathfinder Alerts and International Living classified ads. Nothing secret or "insider" about these, thus contradicting his claim that his selections “truly are insider investments, not available to the public.” Some of these properties are getting shopworn after being repeatedly advertised in these publications for two years or more. And if Mr. McMahon is such a real estate investment genius, why are most of his recommendations his own advertisers? When McMahon uses the word "insider", it really means "advertiser".
Case in point is the last “Alert” I received the morning before I called to cancel my subscription. The title was “Last 2 Lots at this Low Price (Great Views)”. The project was “The Preserve at
”, a Costa Rican project I’m already familiar with as the result of a free Pathfinder Alert. This morning’s alert told of two remaining half-acre lots available to RETA subscribers at the low price of $25,000 each, with 10% cash down and interest-free monthly payments of $187.50 per month for 10 years. McMahon tells us “Arenal is facing an inventory crunch. Land prices have risen,” when the opposite is happening. It always amuses me when I'm told that Costa Rica is running out of land. Lake Arenal
I had already recently communicated with owner Greg Coxon, who basically offered the same deal to me: “Our lowest price lots start at 25k.” and “Were [sic] offering no interest financing on short term loans,” thus contradicting McMahon’s promise of “off-market deals” and “massive discounts like 50%.” Moreover, the views from these lots are jungle views, not lake views, which makes a difference at
, also known as the "Lake Tahoe of Costa Rica". Lake Arenal
A closer look at the sales history of The Preserve might make a buyer cautious. Having been marketed for over 2 years now (as determined from the date of the Facebook page), only 22 out of 57 lots have been sold. The pace of sales has slowed in the last year, with only 6 sales last year and one lot unsold (probably a payment default). http://mypreserveatlakearenal.com/html/lots_for_sale.html . Only a model home and a clubhouse have been built. Described as a gated community, the fencing around the gate can easily be stepped over on foot. The lots are not yet graded, and this subdivision is “eco-friendly”, the euphemism for having no public water or sewers. The sewage treatment plant has not yet been built, but there is well water. In other words, this subdivision is still in mostly raw form 2 years later, and the longer development is delayed, the harder it is to sell the remaining lots as prospective buyers become skeptical about the project’s viability. I’ve also never seen slowing lot sales speed up again, as confidence wanes when sales slow down. Subdivisions are my valuation specialty.
The viability of The Preserve also needs to be judged in the context of its milieu. It is adjacent to another struggling community known as Turtle Cove Lake and Yacht Club. Turtle Cove has a marina, boat storage, and 5 custom homes built so far (two of which are for sale). After 5 years of marketing, only 22 out of 47 lots have been sold, and now their developer is holding a fire sale, with discounts of up to 34%. This spells trouble for the neighborhood. Financing is 20% down and 5% interest. The current price list and site plan can be found via this link: http://turtlecovelakeclub.com/arenal-real-estate.html
When lots get discounted like this, the stage is set for negative lot absorption -- many lots will become “unsold” as buyers who already put 20% down realize that all of their equity is gone and they are now “underwater” on their purchase loans, owing more than the lot is worth. Buyers like this are often litigious, too, but lucky for the developers, they will get nowhere in Costa Rican courts, and neither would you. Vacant lots in distressed subdivisions are among the worst real estate investments that can be made, because the investor could lose his entire investment. Why does Pathfinder and RETA promote them so much? And don't get me started on "Pre-construction pricing" on unbuilt condos.
In summary, this shopworn property is not a suitable investment to be offering to subscribers, is more likely to lose money than make subscribers rich, and Real Estate Trend Alert is no more than a marketing gimmick that repackages paid advertisements into recommendations from a fake expert (a young man who came to IL from the dot.com industry) while collecting hefty fees from gullible subscribers.
PS: April 28, 2013, ten weeks later --
Pathfinder Alert has become increasingly desperate to market these shopworn Lake Arenal properties, with almost daily alerts. Today's alert reads:
"Once word gets out about this place, and it becomes trendy or hip, it could explode. There's no reason for its low property prices, other than the fact that nobody knows about it....
A lake-view lot for $17,500 - and it's open to offers."
What? Could Ronan's insider deal at $25,000 ten weeks ago have actually been marked down 30% since then? And still be open to offers?
PPS: February, 2014, one year later: The Preserve at Lake Arenal now has 36 lots for sale vs. 35 lots one year ago, indicating a net loss of one sale during the past year, and they are still offering "pre-construction" pricing! I seriously doubt if this project will get built.
Nevertheless, I just received this "Pathfinder Alert" from Margaret Summerfield:
"How to make $1.1 million in Costa Rica
Last week, Ronan McMahon told RETA members how they could have made massive profits from a land purchase in Arenal, Costa Rica. If you’re looking for access to “insider deals”, RETA could be your most valuable membership. Join Real Estate Trend Alert to be briefed the next time an opportunity like this crosses Ronan’s desk."
This phantom $1.1 million profit would have supposedly come from subdividing a large residential estate that sold at half its original listing price, but what hasn't been mentioned is that permits are needed to subdivide the land and Costa Rica's rules for approving subdivisions are just as onerous as California's; approvals take years, not months. Then you have to find buyers for the lots, and buyers have been scarce at Arenal over the last 2 years. If someone made $1.1 million on this deal, I would like to receive proof.
The style of communication of Pathfinder also presents some concerns. I'm talking about the frequent underlining, highlighting, bolding and exclamation marks!! Where have I seen this before? Just about every piece of spam I get, such as ads for miracle weight loss or genital enlargement pills. It's just so transparently sleazy.